STOCK PURCHASE AND SALE AGREEMENT
                                 (SANTA MONICA)

         AGREEMENT  dated as of August 27, 1997, by and between the  individuals
named in Section 1.1 below  (referred  to herein  individually  as "Seller"  and
collectively as "Sellers") and HEALTHCARE  HEARING  CLINICS,  INC., a Washington
corporation ("Purchaser").

                                    RECITALS

         A. Hearing Care Associates-Santa Monica, Inc., a California corporation
(the  "Company"),  operates an audiology and hearing aid clinic in Santa Monica,
California,   which  performs  testing  and  evaluation  of  patients'  hearing,
prescribes and fits hearing aids, and provides related services and products.

         B. Sellers own all shares of the issued and  outstanding  capital stock
of the Company (the "Shares").

         C. Purchaser and Sellers desire that Purchaser acquire ownership of the
Company through a purchase of the Shares.

                                      TERMS

         In  consideration  of  the  premises  and  of  the  mutual   covenants,
representations,  warranties and agreements  contained herein, the parties agree
as follows:

                                    ARTICLE I
                           PURCHASE AND SALE OF SHARES

         1.1 Ownership of Shares. The Shares are owned by Sellers as follows:

         Sellers                    Shares       Percentage
         -------                    ------       ----------

         Carissa D. Bennett          50              25
         Gregory J. Frazer           50              25
         Evelyn L. Gong             100              50
                                    ---              --
                                    200             100

         1.2 Purchase and Sale of Shares.  At the Closing (as defined in Section
2.1), on the terms and subject to the  conditions  set forth in this  Agreement,
Sellers shall sell and deliver to Purchaser,  and Purchaser  shall  purchase the
Shares from Sellers.

         1.3 Purchase  Price.  Subject to adjustment as set forth in Section 1.4
hereof,  the purchase  price for the Shares (the  "Purchase  Price")  shall be a
total of $258,268 payable to Sellers as follows:



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                  Sellers

                  Carissa D. Bennett        $ 64,567
                  Gregory J. Frazer           64,567
                  Evelyn L. Gong             129,134
                                             -------
                                            $258,268

At the Closing,  Purchaser  shall pay the Purchase Price to Sellers by certified
or cashier's check.

         1.4 Purchase Price Adjustments.  The Purchase Price shall be subject to
post- closing adjustment as set forth below:

                  (a)  Accounts  Receivable.  On the  200th  day  following  the
         Closing,  Sellers shall  reimburse  Purchaser on a pro rata basis in an
         amount equal to the total of the accounts  receivable  reflected on the
         Statement of Net Working  Capital (as defined in  subsection  1.4(c)(i)
         below) net of the allocable portion of the reserve for bad debts, which
         remain  uncollected  as of such date  provided that with respect to the
         accounts  receivable  listed on Schedule  1.4(a) attached  hereto,  the
         reimbursement  date shall be the first anniversary of the Closing date.
         Upon such reimbursement,  the uncollected accounts shall be assigned to
         Sellers. During such 200-day period (or the 365-day period with respect
         to the  accounts  receivable  listed on  Schedule  1.4(a),  Sellers may
         participate in the collection process of such accounts  receivable.  In
         the  event  the  total  amount   collected  with  respect  to  accounts
         receivable  reflected on the Statement of Net Working  Capital  exceeds
         the amount of such accounts  receivable net of the  applicable  reserve
         for bad debts,  Purchaser  shall pay the excess to Sellers  pro rata on
         the 200th day following Closing.

                  (b) Liabilities.  Sellers  acknowledge that the Purchase Price
         was negotiated on the  assumption  that Company would have no long-term
         liabilities,  including  debt. In the event that at Closing Company has
         long-term  liabilities,  Sellers shall pay to Purchaser,  on a pro rata
         basis, an amount equal to the total of any such long-term liabilities.

                  (c) Net Working Capital Adjustment.

                           (i) For  purposes  of this  Agreement,  "Net  Working
                  Capital" shall equal (i) cash, money market accounts, accounts
                  receivable   (net  of  reasonable   provisions   for  doubtful
                  accounts),  cash surrender  value of life insurance  policies,
                  and  prepaid  expenses  including  rental  payments if paid in
                  advance,  as of Closing less (ii) all current  liabilities  of
                  the  Company  as of  Closing,  including  but not  limited  to
                  liabilities   for   inventory,   office   supplies,   ordinary
                  compensation payables,  employee benefits and taxes (excluding
                  accrued paid time off for  vacation  and sick leave),  bonuses
                  (including all related  payroll taxes and employee  benefits),
                  personal and real property  taxes,  water,  gas,  electric and
                  other  utility  charges,  business and other  license fees and
                  taxes


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                  (excluding  fees for  audiology  and  hearing  aid  dispensing
                  licenses),  merchants' association dues, rental payments under
                  any leases,  any customer  refunds for hearing aids  delivered
                  prior  to  Closing,   and  all  other  operating   liabilities
                  (including legal, accounting,  and other professional fees and
                  expenses incurred in the ordinary course of business),  vendor
                  accounts payable and intercompany  accounts.  In computing Net
                  Working  Capital,  (i) all hearing aids ordered but not fitted
                  to the patient as of the Closing  date will not be included in
                  accounts receivable and (ii) all payments made by Company with
                  respect to such hearing aid orders shall be treated as prepaid
                  items.

                           (ii)  As  promptly  as   practicable   following  the
                  Closing,  but in no  event  later  than  45  days  thereafter,
                  Sellers and Purchaser  shall cooperate in preparing a mutually
                  agreeable statement of the Net Working Capital which shall set
                  forth the  computation  and  components  thereof in reasonable
                  detail (the "Statement of Net Working Capital").

                           (iii) On the  fifteenth  day  after the date on which
                  the  Statement of Net Working  Capital is  completed  (or such
                  earlier  date as such  statement  is  mutually  agreed upon by
                  Sellers and  Purchaser in writing),  (i) in the event that the
                  Net Working Capital exceeds $30,000,  then Purchaser shall pay
                  to Sellers pro rata an amount equal to the excess,  or (ii) in
                  the event that Net Working Capital is less than $30,000,  then
                  Sellers  shall pay to Purchaser,  pro rata,  the amount of the
                  deficiency.

                                   ARTICLE II
                                     CLOSING

         2.1 Closing.  The closing of the  transaction  provided for herein (the
"Closing")  shall occur on such date on or before September 1, 1997, and at such
time and place as the parties shall mutually agree.

         2.2  Closing  Transactions.  The  following  actions  shall be taken at
Closing,  each of which shall be conditional on completion of all the others and
all of which shall be deemed to have taken place simultaneously:

                  (a) Deliveries by Sellers. Sellers shall deliver to Purchaser:

                           (i) Certificates representing the Shares;

                           (ii) An opinion of  counsel to  Sellers,  dated as of
                  the  Closing  date,  substantially  in the  form  of  Schedule
                  2.2(a)(ii) attached hereto; and

                           (iii) The stock and minute books of the Company;

                           (iv) All  consents  required in  connection  with the
                  transactions contemplated hereunder.


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                  (b)  Deliveries  by  Purchaser.  Purchaser  shall  deliver  to
         Sellers:

                           (i) The payments provided for in Section 1.3; and

                           (ii) An opinion of counsel to Purchaser,  dated as of
                   the  Closing  date,  substantially  in the  form of  Schedule
                   2.2(b)(ii) attached hereto.

                  (c) Joint Delivery.

                           (i)  Purchaser  and Sellers shall execute and deliver
                   counterparts of the Noncompetition Agreements provided for in
                   Section 6.5(a) hereof; and

                           (ii)  Purchaser  and Evelyn L. Gong shall execute and
                   deliver  to  each  other   counterparts   of  the  Employment
                   Agreement provided for in Subsection 6.5(b) hereof.

                                   ARTICLE III
                  REPRESENTATIONS AND WARRANTIES OF THE SELLERS

         Except as  otherwise  set forth in the  Disclosure  Statement  attached
hereto as Schedule III, Sellers  represent and warrant to Purchaser as set forth
below in this  Article  III.  Subject  to the  limitations  set forth in Section
8.1(a),  the Sellers shall be jointly and severally  liable for breaches of such
representations  and  warranties  except to the extent  otherwise  expressly set
forth in Section 3.1(b) hereof.

         3.1 Corporate.

                  (a) Organization.  The Company is a corporation duly organized
         and existing under the laws of the state of California.

                  (b)  Capitalization.  The  authorized  capital  stock  of  the
         Company consists of a single class of common stock, of which 200 shares
         are issued and outstanding. All issued and outstanding Shares have been
         validly  issued  and are  fully  paid and  nonassessable.  Each  Seller
         separately  warrants  that such  Seller  is the owner of the  number of
         shares  shown in Section 1.1 hereof  (beneficially  and of record) free
         and clear of all liens, claims, and encumbrances whatsoever. The Shares
         constitute all the outstanding  shares of capital stock of the Company.
         Except for a Buy-Out  Agreement  to which the Sellers are  parties,  no
         person has any agreement,  option or other right, present or future, to
         purchase  or  otherwise  acquire  any of the  shares of  Company.  Such
         Buy-Out Agreement will be terminated effective as of the Closing date.

                  (c) Corporate Power.  The Company has all requisite  corporate
         power and  authority to own,  operate and lease its  properties  and to
         carry on its business as and where such is now being conducted.


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                  (d) No  Subsidiaries.  The Company does not own an interest in
         any corporation, partnership or other entity.

                  (e) Articles of Incorporation; Bylaws. The copies of Company's
         articles  of  incorporation  (certified  by the  Secretary  of State of
         California) and bylaws  (certified by Company's  secretary)  which have
         heretofore  been  delivered  to  Purchaser  are complete and correct as
         amended or restated to the date hereof.

         3.2 No Violation.  Neither the execution and delivery of this Agreement
or the other  documents  and  instruments  to be executed  and  delivered by the
Sellers pursuant hereto, nor the consummation by the Sellers of the transactions
contemplated hereby and thereby (a) will violate any statute or law or any rule,
regulation,  order,  writ,  injunction  or decree  of any court or  governmental
authority, (b) will require any authorization,  consent, approval,  exemption or
other action by or notice to any court,  administrative or governmental  agency,
instrumentality,  commission,  authority,  board or body or (c) will  violate or
conflict with, or constitute a default (or an event which,  with notice or lapse
of time,  or both,  would  constitute  a default)  under,  or will result in the
termination  of, or  accelerate  the  performance  required by, or result in the
creation of any  material  Lien (as defined in Section  3.8(b))  upon any of the
assets  of  the  Company  under,  any  term  or  provision  of the  articles  of
incorporation or bylaws of the Company or of any material contract,  commitment,
understanding, arrangement, agreement or restriction of any kind or character to
which the  Company is a party or by which the  Company  or any of the  Company's
assets or properties or the shares of the Company may be bound or affected.

         3.3  Financial  Statements.  The Sellers have  heretofore  delivered to
Purchaser the following  financial  statements of the Company  including balance
sheets and statements of income (the "Financial Statements"):

                  (a) Financial  Statements  for the Company's  1993,  1994, and
         1995 fiscal years; and

                  (b) Financial Statements for the interim period ended November
         30, 1996.

The Financial  Statements are correct and complete in all material  respects and
fairly present the financial condition of the Company at the dates indicated and
results of its operations and changes in its financial  position for the periods
then ended.

         3.4  Absence  of  Certain  Changes.  Since the date of the most  recent
balance sheet included in the Financial Statements, there has not been:

                  3.4(a)  Adverse  Change.  Any material  adverse  change in the
         financial  condition,  assets,  liabilities,   business,  prospects  or
         operations of the Company;

                  3.4(b)  Damage.  Any  material  loss,  damage or  destruction,
         whether covered by insurance or not,  affecting the Company's  business
         or assets;


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                  3.4(c)   Increase  in   Compensation.   Any  increase  in  the
         compensation,  salaries  or wages  payable or to become  payable to any
         employee or agent of the Company (including,  without  limitation,  any
         increase or change  pursuant  to any bonus,  pension,  profit  sharing,
         retirement or other plan or commitment), or any bonus or other employee
         benefit granted, made or accrued;

                  3.4(d) Labor Disputes. Any labor dispute or disturbance, other
         than  routine  individual  grievances  which  are not  material  to the
         business, financial condition or results of operations of the Company;

                  3.4(e)  Commitments.  Any  commitment  or  transaction  by the
         Company (including,  without limitation, any capital expenditure) other
         than in the ordinary course of business consistent with past practice;

                  3.4(f) Dividends.  Any declaration,  setting aside, or payment
         of any dividend or any other  distribution  in respect of the Company's
         capital stock;  any  redemption,  purchase or other  acquisition by the
         Company of any capital stock of the Company,  or any security  relating
         thereto; or any other payment to any Shareholder as a shareholder;

                  3.4(g)  Disposition  of  Property.  Except  as  set  forth  on
         Schedule  3.4(g),  any sale,  lease or other transfer or disposition of
         any  properties or assets of the Company except for sales of inventory,
         consumption of supplies, and nonmaterial dispositions of worn or broken
         parts and equipment in the ordinary course of business;

                  3.4(h)  Indebtedness.  Any  indebtedness  for  borrowed  money
         incurred,  assumed or  guaranteed  by the Company other than changes in
         the Company's line of credit in the ordinary course of business;

                  3.4(i) Amendment of Contracts. Any entering into, amendment or
         termination  by the Company of any contract,  or any waiver of material
         rights thereunder, other than in the ordinary course of business;

                  3.4(j) Loans,  Advances, or Credit. Any loan or advance or any
         grant of credit by the Company; or

                  3.4(k)   Unusual   Events.   Any  other  event  or   condition
         specifically  related  to the  Company  not in the  ordinary  course of
         business  which would have a material  adverse  effect on the assets or
         the business of the Company.

         3.5  Absence of  Undisclosed  Liabilities.  Except as and to the extent
specifically  disclosed  in  the  most  recent  balance  sheet  included  in the
Financial  Statements  or  this  Agreement,   the  Company  does  not  have  any
liabilities other than commercial liabilities and obligations incurred since the
date of such balance sheet in the ordinary  course of business  consistent  with
past practices  none of which has or will have a material  adverse effect on the
business, financial condition or results of operations of the Company.


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         3.6 No Litigation.  There is no action, suit, arbitration,  proceeding,
investigation  or inquiry pending or to the knowledge of the Sellers  threatened
against the Company,  its directors (in such  capacity),  its business or any of
its assets,  nor do the Sellers know of any such  proceeding,  investigation  or
inquiry threatened against the Company.  The Disclosure  Schedule identifies all
actions, suits,  proceedings,  investigations and inquiries to which the Company
has been a party since January 1, 1993.  Neither the Company nor its business or
assets are subject to any  judgment,  order,  writ or  injunction  of any court,
arbitrator  or  federal,   state,  foreign,   municipal  or  other  governmental
department, commission, board, bureau, agency or instrumentality.

         3.7 Compliance With Laws.

                  3.7(a)  Compliance.  Except as set forth in Section  3.7(a) of
         the Disclosure  Schedule,  the Company  (including  each and all of its
         operations, practices, properties and assets) is in material compliance
         with all applicable federal, state, local and foreign laws, ordinances,
         orders,  rules  and  regulations  (collectively,   "Laws"),  including,
         without  limitation,  those applicable to discrimination in employment,
         occupational   safety  and  health,   trade  practices,   environmental
         protection,   competition  and  pricing,  product  warranties,  zoning,
         building and sanitation,  employment,  retirement and labor  relations,
         and product  advertising  except to the extent any noncompliance  would
         not have a material  adverse  effect upon the assets or the business of
         the Company  taken as a whole.  The Company has not received  notice of
         any violation or alleged  violation of, and is not subject to liability
         for past or continuing  violation of, any Laws. All reports and returns
         required to be filed by the  Company  with any  governmental  authority
         have been filed,  and were  accurate and complete  when filed except to
         the extent any deficiency would not have a material adverse effect upon
         the assets or the business of the Company taken as whole.

                  3.7(b)  Licenses  and  Permits.  The Company has  obtained all
         licenses,  permits,  approvals,  authorizations  and  consents  of  all
         governmental   and  regulatory   authorities   and  all   certification
         organizations  required for the conduct of its businesses (as presently
         conducted)  except  to the  extent  failure  to do so would  not have a
         material  adverse effect upon the assets or the business of the Company
         taken as a whole. All such licenses, permits, approvals, authorizations
         and consents are described in the  Disclosure  Schedule and are in full
         force and effect. The Company (including its operations, properties and
         assets)  is and has  been in  compliance  with  all  such  permits  and
         licenses, approvals,  authorizations and consents, except to the extent
         any  noncompliance  would not have a material  adverse  effect upon the
         assets or the business of the Company taken as a whole.

         3.8 Title to and Condition of Properties.

                  3.8(a) Real  Property.  Except as set forth on the  Disclosure
         Schedule,  the Company does not own any  interest in any real  property
         other than the leases referred to in Section 3.10(a) hereof.


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                  3.8(b) Personal Property.  The Company has good and marketable
         title  to all its  assets,  free  and  clear  of all  mortgages,  liens
         (statutory  or  otherwise),   security  interests,   claims,   pledges,
         equities, options,  conditional sales contracts,  assessments,  levies,
         easements,   covenants,   reservations,    restrictions,    exceptions,
         limitations,   charges  or  encumbrances   of  any  nature   whatsoever
         (collectively,  "Liens"). All the Company's tangible assets are located
         at the business  premises leased by the Company.  No personal  property
         owned by Sellers is located at Company's business premises.

                  3.8(c) Condition. All the Company's tangible assets are, taken
         as a whole,  in good  operating  condition and repair,  normal wear and
         tear excepted.

                  3.8(d)  Land  Use  Regulations.  There  are  no  condemnation,
         environmental,  zoning,  land  use,  or other  regulatory  proceedings,
         pending or, to the knowledge of the Sellers,  planned to be instituted,
         that could detrimentally affect the ownership, use, or occupancy of the
         real  property  presently  occupied  by the  Company  or the  continued
         operation of the Company's business as it is presently being conducted.

         3.9  Insurance.  The  Company  maintain  policies  of fire,  liability,
product  liability,  workers  compensation,  health and other forms of insurance
with such coverage  limits and deductible  amounts as are reasonable and prudent
in light of the nature of its assets and the risks of its business.

         3.10 Contracts and Commitments.

                  3.10(a)  Leases.   Set  forth  in  Schedule   3.10(a)  of  the
         Disclosure  Schedule is a list of all real and personal property leases
         to which the Company is a party.  Complete  and correct  copies of each
         lease  listed  on  the  schedule,  and  all  amendments  thereto,  have
         heretofore been made available to Purchaser.

                  3.10(b) Purchase Commitments. Set forth in Schedule 3.10(b) of
         the Disclosure  Schedule is a list of all agreements  (written or oral)
         between  the Company  and third  parties for the  purchase of goods and
         supplies by the Company which  individually call for the payment by the
         Company after the date hereof of more than $1,000 or which obligate the
         Company  for a  period  of more  than 90 days  from  the  date  hereof.
         Complete  and  correct  copies  of all  such  written  agreements  have
         heretofore been made available to Purchaser.

                  3.10(c) Sales  Commitments.  Set forth in Schedule  3.10(c) of
         the  Disclosure  Schedule is a list and  description  of all  presently
         effective  agreements  (written or oral)  between the Company and third
         parties for the  distribution  and sale of its  products.  Complete and
         correct copies of all such written  contracts have heretofore been made
         available to Purchaser.

                  3.10(d) Contracts With Sellers and Certain Others.  Except for
         the  employment  relationships  which exist between the Sellers and the
         Company, the


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         Company  has  no  agreement,  understanding,   contract  or  commitment
         (written or oral) with any Seller, or any relative of a Seller.

                  3.10(e) Collective Bargaining Agreements. The Company is not a
         party to any collective bargaining agreement with any union.

                  3.10(f) Loan Agreements. Except as set forth on the Disclosure
         Schedule,  the  Company  is not  obligated  under  any loan  agreement,
         promissory note, letter of credit, or other evidence of indebtedness as
         signatories, guarantors or otherwise.

                  3.10(g)  Guarantees.  The Company has not under any instrument
         which is presently  effective  guaranteed the payment or performance of
         any person, firm or corporation,  agreed to indemnify any person or act
         as a surety,  or otherwise  agreed to be  contingently  or  secondarily
         liable for the obligations of any person.

                  3.10(h) Restrictive Agreements.  The Company is not a party to
         nor is it bound by any agreement requiring it to assign any interest in
         any  trade  secret  or  proprietary  information,   or  prohibiting  or
         restricting it from competing in any business or  geographical  area or
         soliciting  customers or otherwise  restricting it from carrying on its
         business anywhere in the world.

                  3.10(i) Other Material  Contracts.  The Company is not a party
         to any lease, license, contract (including without limitation contracts
         with health  maintenance  organizations)  or  commitment  of any nature
         involving  consideration or other  expenditure in excess of $1,000,  or
         involving  performance over a period of more than 90 days from the date
         hereof, or which is otherwise  individually  material to the operations
         of the  Company,  except  as  set  forth  in  Schedule  3.10(i)  of the
         Disclosure Schedule.

                  3.10(j) No Default.  The  Company is not in default  under any
         lease, agreement, contract or commitment, nor has any event or omission
         occurred which through the passage of time or the giving of notice,  or
         both, would  constitute a default  thereunder or cause the acceleration
         of any of the  Company's  obligations  or result in the creation of any
         Lien on any of the assets  owned,  used or occupied by the Company.  To
         the  knowledge of the Sellers,  no third party is in default  under any
         lease,  agreement,  contract  or  commitment  to which the Company is a
         party,  nor has any  event or  omission  occurred  which,  through  the
         passage of time or the giving of notice,  or both,  would  constitute a
         default  thereunder  or give rise to an automatic  termination,  or the
         right of discretionary termination thereof.

         3.11  Employee  Benefit  Plans.  Set  forth  in  Schedule  3.11  of the
Disclosure  Schedule,   is  a  description  of  all  pension,   profit  sharing,
retirement, bonus, executive or deferred compensation, hospitalization and other
similar fringe or employee  benefit plans,  programs and  arrangements,  and any
employment or consulting contracts, "golden parachutes," severance agreements or
plans,  vacation  and  sick  leave  plans  including,  without  limitation,  all
"employee benefit plans" (as defined in Section 3(3) of the Employee


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Retirement  Income  Security Act of 1974,  as amended  ("ERISA")),  all employee
manuals,  and all written or binding oral  statements of policies,  practices or
understandings  relating to  employment,  which are provided to, for the benefit
of, or relate to, any persons  employed by the Company.  The items  described in
the foregoing  sentence are  hereinafter  sometimes  referred to collectively as
"Employee  Plans/Agreements."  True and correct  copies of all written  Employee
Plans/Agreements,   including  all  amendments  thereto,  have  heretofore  been
provided  to  Purchaser.  The  Company is in  compliance  with and have made all
payments due under all Employee  Plans/Agreements  and with respect  thereto the
Company  is in  compliance  with  all  applicable  federal  and  state  laws and
regulations. The Company is not a contributor to any multi-employer pension plan
which has an unfunded liability with respect to benefits due its participants.

         3.12  Employment  Compensation.  Set  forth  in  Schedule  3.12  of the
Disclosure Schedule is a true and correct list of:

                  (a) All employees to whom the Company is paying  compensation;
         and in the case of salaried  employees such list identifies the current
         annual rate of compensation for each employee and in the case of hourly
         or commission  employees  identifies certain reasonable ranges of rates
         and the number of employees falling within each such range;

                  (b) All amounts owed to  employees  of the Company  (including
         the Sellers) for accrued sick pay, vacation pay, and bonus pay.

         3.13  Patents,  Trademarks,  etc.  Set  forth in  Schedule  3.13 of the
Disclosure  Schedule  attached hereto is a list of all United States and foreign
trademarks,  service  marks,  trade names,  brand names,  copyrights,  including
registrations and  applications,  patent and patent  applications,  and employee
covenants and agreements  respecting  intellectual  property ("Trade Rights") in
which the Company now has any interest, specifying the basis on which such Trade
Rights are owned,  controlled,  used or held (under license or otherwise) by the
Company,  and also  indicating  which of such Trade Rights are  registered.  All
Trade Rights shown as  registered in Schedule  3.13 of the  Disclosure  Schedule
have been properly registered,  all pending  registrations and applications have
been  properly  made and filed and all annuity,  maintenance,  renewal and other
fees relating to registrations or applications are current.  In order to conduct
the business of the Company,  as such is currently being conducted,  the Company
does not require any Trade Rights that it does not already have.  The Company is
not  infringing  and has not  infringed  on any Trade  Rights of  another in the
operation  of its  business,  nor to the  knowledge  of the Sellers is any other
person  infringing  on the Trade  Rights of the  Company.  The  Company  has not
granted  any  license  or made any  assignment  of any Trade  Right and no other
person has any right to use any Trade  Right owned or held by the  Company.  The
Company does not pay any royalties or other  consideration  for the right to use
any  Trade  Rights  of  others.  Except  as set  forth in  Schedule  3.13 of the
Disclosure  Schedule,  to the  knowledge  of  Sellers,  there are no  inquiries,
investigations  or claims or litigation  challenging or threatening to challenge
the  Company's  right,  title and interest with respect to its continued use and
right to preclude  others  from using any Trade  Rights of the  Company.  To the
knowledge of Sellers, all Trade


                                     - 10 -

<PAGE>


Rights of the Company are valid, enforceable and in good standing, and there are
no  equitable  defenses  to  enforcement  based  on any act or  omission  of the
Company.

         3.14 Product Warranty and Product Liability. Set forth in Schedule 3.14
of the Disclosure Schedule is a true, correct and complete copy of the Company's
standard warranty or warranties for sales of its products.

         3.15 Tax  Matters.  The Company  has  properly  completed  and filed in
correct form all federal, state, and other tax returns (including Forms 1099 and
other informational  returns) of every nature required to be filed by it and has
paid all taxes  (whether or not requiring  the filing of returns)  including all
deficiencies,  assessments,  additions to tax,  penalties  and interest of which
notice has been received to the extent such amounts have become due. The Company
has  obtained  all  required  Forms  W-9.  Complete  and  correct  copies of the
Company's  federal and  California  income tax returns for 1993,  1994, and 1995
have been delivered by the Sellers to Purchaser.  All tax liabilities  have been
fully and properly reflected in the Financial Statements. The income tax returns
of the Company have not been examined by the Internal Revenue Service. There are
no  outstanding   agreements  or  waivers  extending  the  statutory  period  of
limitation  for any  federal or state tax return of the  Company for any period.
The Company has made all  required  deductions  and  payments  and has  properly
prepared and delivered all required documents in connection with the withholding
of taxes from the wages and other compensation of its employees. The Company has
filed all  sales/use  tax returns and have paid all such taxes for all states in
which they have responsibility to do so. The Company has obtained and maintains,
to the extent required by law, a current sales and use tax exemption certificate
for each customer to which it makes tax-exempt sales.

         3.16 Key  Employees;  Bank;  Etc.  Set  forth in  Schedule  3.16 of the
Disclosure Schedule is a list showing:

                  (a)  The names of all the Company's officers and directors;

                  (b) The name of each  bank at  which  the  Company  has (i) an
         account  and the  numbers of all  accounts,  (ii) a line of credit,  or
         (iii) a safe deposit box and the name of each person authorized to draw
         thereon or have access thereto; and

                  (c) The name of each person  holding a power of attorney  from
         the Company and a summary of the terms thereof.

         3.17 Records.  The books of account of the Company  fairly  reflect the
items of income and  expense and the assets,  liabilities,  and  accruals of its
business and operations.

         3.18 Disclosure.  No  representation or warranty by the Sellers in this
Agreement, nor any statement,  certificate, schedule or exhibit hereto furnished
or to be  furnished by or on behalf of the Sellers  pursuant to this  Agreement,
nor  any  document  or  certificate  delivered  to  Purchaser  pursuant  to this
Agreement or in connection with transactions contemplated


                                     - 11 -

<PAGE>


hereby, contains or shall contain any untrue statement of material fact or omits
or shall omit a material fact necessary to make the statements contained therein
not misleading.

                                   ARTICLE IV
                   REPRESENTATIONS AND WARRANTIES OF PURCHASER

         Purchaser hereby represents and warrants to the Sellers as follows:

         4.1 Corporate.

                  (a)  Organization.  Purchaser is a corporation  duly organized
         and validly existing under the laws of the state of Washington.

                  (b) Corporate  Power.  Purchaser  has all requisite  corporate
         power and authority to own, operate and lease its properties,  to carry
         on its business as and where such is now being conducted, to enter into
         this Agreement and the other  documents and  instruments to be executed
         and  delivered  by  Purchaser  pursuant  hereto  and to  carry  out the
         transactions contemplated hereby and thereby.

                  (c)  Authority.  The execution and delivery of this  Agreement
         and the consummation of the transactions  contemplated hereby have been
         duly authorized by the board of directors of HealthCare. This Agreement
         constitutes the valid and binding  agreement of Purchaser,  enforceable
         against Purchaser in accordance with its terms.

                  (d) Qualification.  Purchaser is duly licensed or qualified to
         do business as a foreign corporation,  and is in good standing, in each
         jurisdiction wherein the character of the properties owned or leased by
         it,  or  the  nature  of  its   business,   makes  such   licensing  or
         qualification necessary.

         4.2 No Violation.  Neither the execution and delivery of this Agreement
or the other documents and instruments to be executed and delivered by Purchaser
pursuant  hereto,   nor  the  consummation  by  Purchaser  of  the  transactions
contemplated hereby and thereby (a) will violate any statute or law or any rule,
regulation,  order,  writ,  injunction  or decree  of any court or  governmental
authority, (b) will require any authorization,  consent, approval,  exemption or
other action by or notice to any court,  administrative or governmental  agency,
instrumentality,  commission,  authority,  board or body, or (c) will violate or
conflict with, or constitute a default (or an event which,  with notice or lapse
of time,  or both,  would  constitute  a default)  under,  or will result in the
termination  of, or  accelerate  the  performance  required by, or result in the
creation of any  material  Lien upon any of the assets of Purchaser  under,  any
term or provision of the Articles of Incorporation or By-laws of Purchaser or of
any material  contract,  commitment,  understanding,  arrangement,  agreement or
restriction  of any kind or character to which  Purchaser is a party or by which
Purchaser or any of its assets or properties may be bound or affected.


                                     - 12 -

<PAGE>



         4.3  Disclosure.  No  representation  or warranty by  Purchaser in this
Agreement nor any statement,  certificate,  schedule or exhibit hereto furnished
or to be furnished by or on behalf of Purchaser pursuant to this Agreement,  nor
any document or certificate delivered to Purchaser pursuant to this Agreement or
in connection with transactions  contemplated hereby,  contains or shall contain
any untrue  statement  of material  fact or omits or shall omit a material  fact
necessary to make the statements contained therein not misleading.

                                    ARTICLE V
                                    COVENANTS

         5.1 Covenants of Sellers.

                  (a) Access to Information and Records.  The Sellers agree that
         during  the  period  after the date  hereof  and prior to the  Closing,
         Purchaser, its counsel,  accountants and other representatives shall be
         provided (i) reasonable  access during normal  business hours to all of
         the properties,  books, records, contracts and documents of the Company
         for the  purpose  of such  inspection,  investigation  and  testing  as
         Purchaser deems  appropriate  (and Sellers shall furnish or cause to be
         furnished to Purchaser and its  representatives  all  information  with
         respect to the  business  and affairs of the Company as  Purchaser  may
         reasonably request);  (ii) reasonable access to employees and agents of
         the  Company  for  such  meetings  and   communications   as  Purchaser
         reasonably desires;  and (iii) with the prior consent of the Company in
         each  instance  (which  consent  shall not be  unreasonably  withheld),
         access to vendors,  customers, and others having business dealings with
         the Company.

                  (b) Conduct of Business Pending the Closing. The Sellers agree
         that from the date  hereof  until  the  Closing,  except  as  otherwise
         approved in writing by Purchaser:

                           (i)  No  Changes.  The  Company  will  carry  on  its
                  business  diligently  and in the same manner as heretofore and
                  will not make or  institute  any  changes  in its  methods  of
                  purchase, sale, management, accounting or operation.

                           (ii) Maintain Organization.  The Company will use its
                  best  efforts to maintain,  preserve,  renew and keep in force
                  and effect the existence, rights and franchises of the Company
                  and to  preserve  the  business  organization  of the  Company
                  intact,  to keep  available to Purchaser the present  officers
                  and  employees of the Company,  and to preserve for  Purchaser
                  its present  relationships  with  suppliers  and customers and
                  others having business relationships with the Company.

                           (iii)  No  Breach.  The  Company  will  use its  best
                  efforts to avoid any act, or any  omission  to act,  which may
                  cause  a  breach  of  any  material  contract,  commitment  or
                  obligation,  or any  breach of any  representation,  warranty,
                  covenant or agreement made by the Sellers.


                                     - 13 -

<PAGE>


                            (iv)  No   Material   Contracts.   No   contract  or
                 commitment  will be entered  into,  and no  purchase  of assets
                 (tangible or  intangible)  will be made, by or on behalf of the
                 Company,  except  contracts,  commitments,  purchases  or sales
                 which are in the  ordinary  course of business  and  consistent
                 with past practice.

                            (v) No  Corporate  Changes.  The  Company  shall not
                 amend  its  Articles  of  Incorporation  or  Bylaws or make any
                 changes in its authorized or issued capital stock;  the Company
                 shall not grant any option or other  right to acquire any share
                 of its authorized capital stock;

                            (vi)  Maintenance  of  Insurance.  The Company shall
                 maintain  all of its  insurance in effect as of the date hereof
                 or replace such  insurance with  comparable  coverage and shall
                 procure  such  additional  insurance  as  shall  be  reasonably
                 requested by Purchaser at Purchaser's expense.

                            (vii)  Maintenance  of Property.  The Company  shall
                 use, operate, maintain and repair all its assets and properties
                 in a normal business manner  consistent with the Company's past
                 practices.

                            (viii) Interim Financials.  The Company will provide
                 Purchaser with interim monthly  financial  statements and other
                 management reports as and when they are available.

                            (ix) No Dividends.  The Company shall not declare or
                 pay any dividend  (whether in cash,  stock or property) or make
                 any other distribution to the Sellers, except for the repayment
                 of loans made by the Sellers to the Company.

                            (x) Compensation. The Company shall not increase the
                 compensation  or benefits of any of its  employees nor make any
                 other change in the terms of their employment.

                  (c) Repayment of Sellers'  Loans.  As of the date hereof,  the
         Company is indebted to the Sellers as set forth on Schedule 5.1(c). For
         purposes of Section 1.4(b) hereof, such debts shall not be deemed to be
         long-term  liabilities.  Notwithstanding  any other  provision  of this
         Agreement,  on or prior to the  Closing  date,  Sellers  shall have the
         right to cause the Company to repay such indebtedness to the extent the
         Company has funds  available for such purposes.  To the extent any such
         debts are not paid prior to Closing, (i) such debts shall be taken into
         account in computing the Net Working Capital adjustment provided for in
         Section  1.4(c),  and (ii) Purchaser shall cause the Company to pay all
         such  debts at the  time the Net  Working  Capital  adjustment  is made
         pursuant to Section  1.4(c)(iii).  To the extent  necessary,  Purchaser
         shall advance funds to the Company for such debt repayment.


                                     - 14 -

<PAGE>


                  (d)  Reimbursement  of Sick and Vacation Pay. In preparing the
         Statement  of Net  Working  Capital it has been  agreed that no accrual
         shall be made for sick and vacation pay  entitlements  for employees of
         Company. In consideration of this exclusion, Sellers agree to reimburse
         Purchaser  for any sick or vacation pay payments  Purchaser is required
         to  make to  former  employees  of  Company  who  become  employees  of
         Purchaser  and whose  employment  terminates  for any reason within the
         first six months following the Closing date to the extent such payments
         relate to accruals of sick or vacation pay prior to the Closing date.

         5.2 Release of  Sellers'  Personal  Guarantees.  Certain  Sellers  have
provided personal  guarantees or have otherwise become  individually liable with
respect to certain leases,  line of credit agreements,  purchase agreements with
manufacturers,  or other agreements for the benefit for the Company,  including,
without  limitation,  those  described on Schedule  5.2.  Following the Closing,
Purchaser  will use its best  efforts to obtain the release of the Sellers  from
all such  personal  liabilities.  To the extent that any such release  cannot be
obtained, Purchaser will indemnify and hold the Sellers harmless with respect to
any  loss,  cost,  or  expense  the  Sellers  may incur as a result of not being
released.

                                   ARTICLE VI
                 CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS

         Each and every obligation of Purchaser to be performed at Closing shall
be  subject to the  satisfaction  prior to or at the  Closing  (or the waiver by
Purchaser) of each of the following conditions:

         6.1  Representations  and  Warranties  True  at  Closing.  Each  of the
representations and warranties made by the Sellers in this Agreement,  or in any
instrument, schedule, list, certificate or writing delivered by Sellers pursuant
to this  Agreement,  shall be true and  correct  when made and shall be true and
correct  in all  material  respects  at and as of the  Closing  as  though  such
representations and warranties were made as of the Closing.

         6.2 Compliance With  Agreement.  The Sellers shall have in all material
respects  performed and complied with all of their  agreements  and  obligations
under this Agreement which are to be performed or complied with by them prior to
or on the Closing,  including the delivery of the closing documents specified in
Section 2.2(a) hereof.

         6.3  Absence of Suit.  No action,  suit,  investigation  or  proceeding
before any court or any  governmental  authority  shall have been  commenced  or
threatened, against Purchaser, the Company or any of the affiliates, officers or
directors  of  any  of  them,  seeking  to  restrain,   prevent  or  change  the
transactions contemplated hereby, or questioning the validity or legality of any
such  transactions,  or seeking  damages in  connection  with,  or imposing  any
condition on, any such transactions;  provided that the obligations of Purchaser
shall not be affected  unless there is a reasonable  likelihood that as a result
of such action, suit,  investigation,  or proceeding Purchaser will be unable to
retain  substantially all the practical  benefits of the transaction to which it
is entitled under this Agreement.


                                     - 15 -

<PAGE>


         6.4 Approvals;  Consents. All consents, permits, approvals, licenses or
orders from any governmental or regulatory body or other third party required to
be obtained by Sellers for the consummation of the transactions  contemplated by
this  Agreement  shall have been  obtained  except where  failure to obtain such
consents,  permits,  approvals,  licenses  or orders  would not have a  material
adverse  effect  (whether or not such effect is referred to or  described in any
Schedule) on the business, prospects,  financial conditions, assets, reserves or
operations of the Company taken as a whole.

         6.5 Agreements.

                  (a) Noncompetition Agreements. Each Seller shall have executed
         and delivered to Purchaser a Noncompetition  Agreement substantially in
         the form attached hereto as Schedule 6.5(a).

                  (b) Employment  Agreement.  Evelyn L. Gong shall have executed
         and delivered to Purchaser an Employment Agreement substantially in the
         form of Schedule 6.5(b) hereto.

                                   ARTICLE VII
                CONDITIONS PRECEDENT TO THE SELLERS' OBLIGATIONS

         Each and every  obligation  of the Sellers to be  performed  at Closing
shall be subject to the  satisfaction  prior to or at the Closing (or the waiver
by the Sellers) of the following conditions:

         7.1  Representations  and  Warranties  True  at  Closing.  Each  of the
representations  and warranties made by Purchaser in this  Agreement,  or in any
instrument, list, certificate or writing delivered by Purchaser pursuant to this
Agreement,  shall be true and correct when made and shall be true and correct at
and as of the Closing as though such representations and warranties were made as
of the Closing.

         7.2 Compliance  With  Agreement.  Purchaser  shall have in all material
respects  performed  and  complied  with  all  of  Purchaser's   agreements  and
obligations  under this Agreement  which are to be performed or complied with by
Purchaser  prior to or on the  Closing,  including  the  delivery of the closing
documents specified in Section 2.2(b) hereof.

         7.3 Absence of Suit.  No action,  suit,  investigation,  or  proceeding
before any court or any  governmental  authority  shall have been  commenced  or
threatened against Purchaser, the Company or any of the affiliates,  officers or
directors  of  any  of  them,  seeking  to  restrain,   prevent  or  change  the
transactions contemplated hereby, or questioning the validity or legality of any
such  transactions,  or seeking  damages in  connection  with,  or imposing  any
condition  on,  any such  transactions;  provided  that the  obligations  of the
Sellers shall not be affected unless there is a reasonable  likelihood that as a
result of such action,  suit,  proceeding or investigation,  the Sellers will be
unable to retain  substantially all the consideration to which they are entitled
under this Agreement.


                                     - 16 -

<PAGE>


         7.4 Agreements.

                  (a) Noncompetition  Agreements.  Purchaser shall have executed
         and delivered to each Seller a Noncompetition  Agreement  substantially
         in the form attached hereto as Schedule 6.5(a).

                  (b) Employment  Agreement.  Purchaser  shall have executed and
         delivered to Evelyn L. Gong an Employment  Agreement  substantially  in
         the form attached hereto as Schedule 6.5(b).

                                  ARTICLE VIII
                  INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS

         8.1 Indemnification by the Sellers.

                  (a) The Sellers  hereby agree to indemnify,  defend,  and hold
         Purchaser  (and  its  directors,  officers,  shareholders,   employees,
         affiliates,  agents and assigns)  harmless  from and against all Claims
         (as defined  below)  asserted  against,  resulting to, imposed upon, or
         incurred by Purchaser  directly or indirectly by reason of, arising out
         of,  or   resulting   from  (a)  the   inaccuracy   or  breach  of  any
         representation or warranty of the Sellers contained in or made pursuant
         to this Agreement or (b) the non-performance or breach of any covenant,
         term or  provision  to be  performed  by the Sellers  contained in this
         Agreement. The indemnification  obligation of Sellers hereunder is with
         respect to the full amount of the Claims (as defined below). As used in
         this Article  VIII,  the term "Claim" shall include any and all losses,
         liabilities,  damages,  deficiencies,  assessments,  judgments, awards,
         settlements,   costs,  and  expenses   including   without   limitation
         penalties,  court costs, and attorney fees and expenses at trial and on
         appeal.  Notwithstanding the foregoing,  Sellers' indemnity obligations
         shall be subject to the following limitations:

                           (i) Sellers  shall be  responsible  for  indemnifying
                  Purchaser  only to the extent Claims in the  aggregate  exceed
                  the sum of $5,000.

                           (ii)  Each  Seller  shall be solely  responsible  for
                  indemnification  with  respect to such  Seller's  warranty  of
                  title  regarding  Seller's  Shares and such Seller's  warranty
                  regarding the absence of liens and encumbrances  applicable to
                  such Shares;

                           (iii) Each Seller's liability with respect to a Claim
                  shall be limited to a  percentage  of such Claim equal to such
                  Seller's  percentage  ownership  of the Shares as set forth in
                  Section 1.1; and

                           (iv) Each Seller's maximum liability to Purchaser for
                  indemnification  shall not exceed an amount  equal the portion
                  of the  Purchase  Price being paid to such Seller as set forth
                  in Section 1.3 hereof.


                                     - 17 -

<PAGE>


                           (v) Any Claims shall be asserted by Purchaser jointly
                  against Sellers on a uniform basis and any waiver,  compromise
                  or settlement of a Claim offered by Purchaser shall be offered
                  on the same terms to all Sellers.

                  (b) Purchaser's right to  indemnification  as provided in this
         Section 8.1 shall not be eliminated,  reduced or modified in any way as
         a result  of the fact  that (i)  Purchaser  had  notice  of a breach or
         inaccuracy of any representation, warranty or covenant contained herein
         (except as set forth in the  Disclosure  Schedule),  (ii) Purchaser had
         been provided with access,  as requested by Purchaser,  to officers and
         employees  of the  Company  and  such of  Company's  books,  documents,
         contracts  and records as has been provided to Purchaser in response to
         Purchaser's requests.

         8.2 Indemnification by Purchaser. Purchaser hereby agrees to indemnify,
defend,  and hold  harmless  the Sellers  from and  against all Claims  asserted
against,  resulting to,  imposed  upon,  or incurred by the Sellers  directly or
indirectly by reason of, arising out of, or resulting from (a) the inaccuracy or
breach of any  representation  or warranty  of  Purchaser  contained  in or made
pursuant to this Agreement or in any of the documents delivered pursuant hereto,
or (b) the  non-performance  or breach of any covenant,  term or provision to be
performed by Purchaser  contained in this  Agreement or in any of the  documents
delivered pursuant hereto. The indemnification obligation of Purchaser hereunder
is with respect to the full amount of the Claims.

         8.3  Notice;  Defense  of  Claims.  If a claim is to be made by a party
entitled   to   indemnification   hereunder,   the   party   entitled   to  such
indemnification  shall give written notice to the indemnifying party immediately
after the party entitled to indemnification becomes aware of any fact, condition
or event  which  may give  rise to a matter  for  which  indemnification  may be
sought; provided that the failure of any indemnified party to give timely notice
shall not affect the rights to  indemnification  hereunder  except to the extent
that the indemnifying party  demonstrates  actual damage caused by such failure.
If any lawsuit or enforcement  action is filed against any party entitled to the
benefit of indemnity hereunder,  and if the indemnifying party shall acknowledge
in  writing  to the  indemnified  party  that the  indemnifying  party  shall be
obligated  under the terms of its indemnity  hereunder in  connection  with such
lawsuit,  action or claim, then the indemnifying party shall be entitled,  if it
so elects,  to take control of the defense and  investigation of such lawsuit or
action and to employ and engage attorneys of its own choice to handle and defend
the same, at the  indemnifying  party's cost, risk and expense provided that the
indemnifying  party and its counsel  shall  proceed with  diligence  and in good
faith with  respect  thereto.  The  indemnified  party  shall  cooperate  in all
reasonable  respects  with the  indemnifying  party  and such  attorneys  in the
investigation,  trial and  defense  of such  lawsuit  or action  and any  appeal
arising therefrom; provided, however, that the indemnified party may, at its own
cost,  participate  in the  investigation,  trial and defense of such lawsuit or
action and any appeal arising therefrom.

         8.4 Survival of  Representations.  All  representations  and warranties
made by the  parties  in this  Agreement  are  made  only as of the date of this
Agreement but will survive the consummation of the transactions  contemplated by
this Agreement until October 31, 1998


                                     - 18 -

<PAGE>


(except  for the  representations  and  warranties  of the  Sellers set forth in
Section 3.10 hereof which shall expire 90 days after the applicable  statutes of
limitation  shall have run with respect to all tax returns  filed by the Company
for  all  periods  ended  on or  before  the  Closing),  after  which  all  such
representations  and  warranties  shall  expire  except  with  respect to claims
asserted in writing prior to such date.

                                   ARTICLE IX
                                  MISCELLANEOUS

         9.1 Termination.

                  (a) Right of Termination Without Breach. This Agreement may be
         terminated  without further liability of any party at any time prior to
         the Closing:

                            (i) By mutual written agreement of the parties, or

                            (ii)  By  either  Purchaser  or the  Sellers  if the
                 Closing shall not have occurred on or before the 90th day after
                 the  date  hereof,  provided  the  terminating  party  has not,
                 through  breach  of a  representation,  warranty  or  covenant,
                 prevented the Closing from occurring on or before such date.

                  (b) Termination for Breach.

                            (i)  Termination  by Purchaser.  If there has been a
                 material  breach  by the  Sellers  of any of their  agreements,
                 representations or warranties contained in this Agreement which
                 has not been  waived in writing by  Purchaser,  then  Purchaser
                 may,  by  written  notice to  Sellers  at any time prior to the
                 Closing  that  such  breach  is   continuing,   terminate  this
                 Agreement  with the  effect  set forth in  Section  9.1(b)(iii)
                 hereof.

                            (ii)  Termination  by  Sellers.  If there has been a
                 material   breach  by  Purchaser  of  any  of  its  agreements,
                 representations or warranties contained in this Agreement which
                 has not been waived in writing by the Sellers, then the Sellers
                 may, by written  notice to  Purchaser  at any time prior to the
                 Closing  that  such  breach  is   continuing,   terminate  this
                 Agreement with the effect set forth in Section 9.1(b)(iii).

                            (iii)  Effect of  Termination.  Termination  of this
                 Agreement  pursuant  to this  Section  9.1 shall not in any way
                 terminate,  limit or  restrict  the rights and  remedies of any
                 party  hereto  against any other  party  which has  breached or
                 failed  to  perform  any  of the  representations,  warranties,
                 covenants, or agreements of this Agreement prior to termination
                 hereof.

         9.2  Waiver.  Sellers  or  Purchaser  may (a)  extend  the time for the
performance of any of the obligations or other acts of the other,  (b) waive any
inaccuracies in the representations and warranties of the other contained herein
or in any document delivered


                                     - 19 -

<PAGE>


pursuant hereto and (c) waive compliance with any of the agreements of the other
or satisfaction of any of the conditions to its  obligations  contained  herein.
Any  extension  or  waiver  made  pursuant  to this  Section  9.2  must be by an
instrument  in writing  signed on behalf of the party  granting the extension or
waiver. A waiver by any party of any provision hereof or breach hereof shall not
operate or be construed as the waiver of any other  provision or any  subsequent
breach.

         9.3 Binding Effect; No Assignment. This Agreement shall be binding upon
and inure to the  benefit of the  parties and their  respective  successors  and
legal  representatives.  This  Agreement  is not  assignable  and any  purported
assignment shall be null and void.  Nothing contained in this Agreement shall be
deemed to confer any right or benefit  upon any  person  other than the  parties
hereto to the extent herein provided.

         9.4 Dollars.  "Dollars"  and "$" mean lawful money of the United States
of America,  which  shall be legal  tender on the date of payment for all public
and private debts.

         9.5 Brokers and Finders.  Sellers on the one hand and  Purchaser on the
other,  each agree to indemnify and hold the other harmless from and against any
claim made for a broker's or a finder's fee or other similar  compensation  (and
all related  costs and expenses)  asserted  against an  indemnified  party which
arises out of or results from an action taken by an indemnifying party.

         9.6  Headings;  Severability.  The headings in this  Agreement  are for
reference only, and shall not affect the interpretation of this Agreement.  Each
and every  provision of this Agreement shall be treated as separate and distinct
and, in the event of any provision hereof being declared  invalid,  such invalid
provision shall be deemed to be severable and all other provisions  hereof shall
remain in full force and effect.

         9.7  Schedules.  The Schedules are a part of this Agreement as if fully
set forth herein.

         9.8 Disclosures and  Announcements.  Both the timing and the content of
all  disclosures  to third  parties  and  public  announcements  concerning  the
transactions provided for in this Agreement by either Sellers or Purchaser shall
be subject to the approval of the other in all essential  respects,  except that
the Sellers'  approval shall not be required as to any  announcements or filings
Purchaser may be required to make under applicable laws or regulations.

         9.9 Expenses. Sellers agree that all fees and expenses incurred by them
in connection with this Agreement shall be borne by Sellers  including,  without
limitation,  all fees of counsel and accountants;  and Purchaser agrees that all
fees and expenses  incurred by it in  connection  with this  Agreement  shall be
borne by it, including, without limitation, all fees of counsel and accountants.

         9.10 Notice. All notices,  requests,  demands and other  communications
hereunder shall be given in writing and shall be: (a) personally delivered;  (b)
sent  by  telecopier,  facsimile  transmission  or  other  electronic  means  of
transmitting written documents; or (c)


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<PAGE>


sent to the parties at their  respective  addresses  indicated herein by private
overnight courier service.  The respective addresses and telephone numbers to be
used for all such notices, demands or requests are as follows:

         If to Purchaser:        HealthCare Hearing Clinics, Inc.
                                 111 S.W. Fifth Avenue, Suite 2390
                                 Portland, Oregon  97204
                                 Attn: President
                                         Personal & Confidential
                                 Facsimile:  (503) 225-9309

         with a copy to:         Miller, Nash, Wiener, Hager & Carlsen
                                 111 S.W. Fifth Avenue, Suite 3500
                                 Portland, Oregon  97204
                                 Attn: G. Todd Norvell
                                 Facsimile: (503) 224-0155

         If to Sellers:          Evelyn L. Gong
                                 7746 McLaren Avenue
                                 West Hills, California 91304
                                 Facsimile: ( )

         with a copy to:         Richard P. Manson
                                 Graham & James
                                 801 S. Figueroa St., 14 Fl.
                                 Los Angeles, California 90017
                                 Facsimile: (213) 623-4581

         and to:                 Gregory J. Frazer
                                 1477 Dwight Drive
                                 Glendale, California 91207
                                 Facsimile (818) 244-8889

         with a copy to:         Ms. Nancy Borders
                                 Gardner, Carton & Douglas
                                 321 N. Clark Street, Ste. 3400
                                 Chicago, Illinois  60610
                                 Facsimile:  (312) 644-3381

         If personally  delivered,  such communication shall be deemed delivered
upon actual receipt; if electronically transmitted,  such communication shall be
deemed delivered the next business day after  transmission (and the sender shall
bear the burden of proof of delivery);  if sent by overnight courier pursuant to
this paragraph,  such communication shall be deemed delivered upon receipt.  Any
party  to this  Agreement  may  change  its  address  for the  purposes  of this
Agreement by giving notice thereof in accordance with this section.


                                     - 21 -

<PAGE>


         9.11 Resolution of Disputes.

                  (a) Arbitration. Any dispute, controversy or claim arising out
         of or relating to this  Agreement or the  performance by the parties of
         its terms shall be settled by binding  arbitration held in Los Angeles,
         California,  in accordance with the Commercial Arbitration Rules of the
         American Arbitration Association then in effect, except as specifically
         otherwise provided in this Section 9.11. Notwithstanding the foregoing,
         HealthCare,   in  its  discretion,   apply  to  a  court  of  competent
         jurisdiction  for  equitable  relief from any  violation or  threatened
         violation of the covenants of the Shareholders  under Section 5.1(b) of
         this Agreement.

                  (b)  Arbitrators.  If the matter in controversy  (exclusive of
         attorney fees and expenses) shall appear,  as at the time of the demand
         for  arbitration,  to exceed  $50,000,  then the panel to be  appointed
         shall  consist of three  neutral  arbitrators;  otherwise,  one neutral
         arbitrator.

                  (c) Procedures;  No Appeal. The arbitrator(s) shall allow such
         discovery  as  the  arbitrator(s)   determine   appropriate  under  the
         circumstances  and  shall  resolve  the  dispute  as  expeditiously  as
         practicable,  and if reasonably practicable,  within 120 days after the
         selection  of the  arbitrator(s).  The  arbitrator(s)  shall  give  the
         parties written notice of the decision,  with the reasons  therefor set
         out,  and shall have  thirty (30) days  thereafter  to  reconsider  and
         modify  such  decision  if any party so  requests  within ten (10) days
         after the decision. Thereafter, the decision of the arbitrator(s) shall
         be final,  binding,  and  nonappealable  with  respect to all  persons,
         including  (without  limitation)  persons who have failed or refused to
         participate in the arbitration process.

                  (d) Authority. The arbitrator(s) shall have authority to award
         relief  under  legal or  equitable  principles,  including  interim  or
         preliminary relief, and to allocate responsibility for the costs of the
         arbitration and to award recovery of attorney fees and expenses in such
         manner as is determined to be appropriate by the arbitrator(s).

                  (e) Entry of Judgment. Judgment upon the award rendered by the
         arbitrator(s)  may be  entered  in any  court  having in  personam  and
         subject matter  jurisdiction.  The Shareholders  and HealthCare  hereby
         submit to the in personam  jurisdiction of the federal and state courts
         in California for the purpose of confirming any such award and entering
         judgment thereon.

                  (f) Confidentiality.  All proceedings under this Section 9.11,
         and  all  evidence  given  or  discovered  pursuant  hereto,  shall  be
         maintained in confidence by all parties.

                  (g)   Continued   Performance.   The  fact  that  the  dispute
         resolution  procedures  specified in this Section 13 shall have been or
         may  be  invoked  shall  not  excuse  any  party  from  performing  its
         obligations  under this Agreement,  and during the pendency of any such
         procedure  all  parties  shall  continue  to perform  their  respective
         obligations


                                     - 22 -

<PAGE>


         in good faith,  subject to any rights to terminate  this Agreement that
         may be available to any party.

         9.12  Governing  Law. This  Agreement may not be modified or terminated
orally, and shall be construed and interpreted  according to the internal law of
the state of  California,  excluding any choice of law rules that may direct the
application of the laws of another jurisdiction.

         9.13 Counterparts. This Agreement may be executed by the parties hereto
in separate counterparts,  each of which when so executed and delivered shall be
an original,  but all such  counterparts  shall together  constitute one and the
same instrument.  Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all, of the parties hereto.

         9.14 Entire  Agreement.  This instrument  embodies the entire agreement
between the parties hereto with respect to the transactions contemplated herein,
and there have been and are no agreements, representations or warranties between
the parties other than those set forth or provided for herein.

         9.15 Further Assurances.  Both before and after the Closing, each party
will  cooperate  in good faith  with the  others  and will take all  appropriate
action and execute any documents,  instruments,  or conveyances of any kind that
may be  reasonable  necessary or desirable to carry out any of the  transactions
contemplated hereunder.

         9.16 Sellers  Action.  Whenever in this Agreement the Sellers are given
the  discretion  to take or not to take any action,  the decision of the Sellers
shall be made  pursuant  to the vote of the  Sellers  holding a majority  of the
Shares.

         9.17  Termination  of  Restrictions.   Upon  the  consummation  of  the
transactions provided for herein, any restrictions on the transfer of the Shares
shall be waived by Sellers and shall become void and of no further effect.


                                     - 23 -

<PAGE>


         IN  WITNESS  WHEREOF,  the  parties  hereto  have  duly  executed  this
Agreement effective as of the date first above written.


SELLERS:                               PURCHASER:

                                       HEALTHCARE HEARING CLINICS, INC., a
                                       Washington corporation


/s/ Evelyn L. Gong                     By: /s/ Edwin J. Kawasaki
Evelyn L. Gong                                      Edwin J. Kawasaki
                                                    Vice President

/s/ Gregory J. Frazer
Gregory J. Frazer


/s/ Carissa Bennett
Carissa Bennett


The  undersigned,  being the spouses of the Sellers named in the foregoing Stock
Purchase and Sale Agreement,  hereby relinquish all right,  title, and interest,
including,  without  limitation,  any community property rights under California
law to the Shares (as defined in such Agreement) and hereby consent and agree to
the transfer of such Shares pursuant to such Agreement.


/s/ Carissa Bennett                   /s/ Robert Lindgren
Carissa Bennett                       Robert Lindgren


/s/ Gregory J. Frazer
Gregory J. Frazer


                                     - 24 -

<PAGE>


                                    SCHEDULES
                                   (Omitted)


Schedule 1.4(a)            365-Day Accounts Receivable
Schedule 2.2(a)(ii)        Opinion of Sellers' Counsel
Schedule 2.2(b)(ii)        Opinion of Purchaser's Counsel

Schedule III      Disclosure Schedule

         Schedule 3.4               Disposition of Property
         Schedule 3.7(a)            Compliance with laws
         Schedule 3.10(a)           Leases
         Schedule 3.10(b)           Purchase Commitments
         Schedule 3.10(c)           Sales Commitments
         Schedule 3.10(i)           Other Material Contracts
         Schedule 3.11              Employee Benefit Plans
         Schedule 3.12              Employee Compensation
         Schedule 3.13              Patents, Trademarks
         Schedule 3.14              Product Warranty
         Schedule 3.16              Key Employees; Banks

Schedule 5.1(c)            Sellers' Loans
Schedule 5.2               Sellers' Personal Guarantees

Schedule 6.5(a)            Noncompetition Agreement
Schedule 6.5(b)            Employment Agreement


                                     - 25 -